In this post, you will learn about the minimum amount of money required for investing in the stock market. After reading this article, you would get to know what is the smallest number of shares that you can buy in India, how much money is needed to trade online, and what is the least amount that can earn you some profit.
Without any further ado, let’s answer these questions.
What Is The Least Number of Shares That You Can Buy?
One. Yep! That’s the answer to the above question. Let me explain in detail.
On the higher side, you can buy any number of shares that you want. It is only limited by the amount of money you have and the number of shares that are listed on the stock exchange. The only caveat is that you have to buy a whole number of shares and not a fraction.
So, on the lower side, you can buy only one share.
What is The Lowest Amount of Money Needed To Trade Online?
As you know, the share price of different companies is different so your actual investment per share could be as little as Rs. 1/- or as large as Rs. 1,00,000/-. Theoretically, you can trade with only Rs. 1.
But is it practical to trade with one rupee? No. You will always lose money if you trade in such a smaller denomination.
Additionally, most brokers put a minimum limit on the investment. Most brokers would not accept a transaction of less than Rs. 1000/-.
What Is The Smallest Amount Of Money That Can Give You Reasonable Profit?
Most people say that you should start small, learn the tricks of the trait, and then invest large amounts. I whole heartedly agree to that wisdom. But how small is small? Let us understand it through a few scenarios.
For the following scenarios, let us assume that you are dealing with a discount broker who charges Rs. 20/- per transaction as the commission, and (for the sake of discussion) there are no additional charges like annual maintenance charges, Demat charges taxes, etc. Let us also assume that you would make a 10% profit in one buy-sell transaction.
Scenario I
You buy Company X stocks for Rs.100/- and sell them for Rs. 110/- (10% profit). Both buy and sell transactions would cost you Rs. 20/- in commissions. So, your cost is Rs. 40/- (not including the cost of holding the securities) and your profit is miniscule Rs. 10. Essentially, you have made a loss of Rs. 30/- on the whole transaction.
Scenario II
You buy Company X stocks for Rs.1,000/- and sell them for Rs. 1,100/- (10% profit). Both buy and sell transactions would cost you Rs. 20/- in commissions. So, your cost is Rs. 40/- (not including the cost of holding the securities) and your profit is Rs. 100. Essentially, you have made a small profit of Rs. 60/- on the whole transaction.
It is a good profit. In percentage terms, you would have made 6% (60/1000) profit. It is a decent profit but still much less than 10%. Let us look at the third scenario.
Scenario III
You buy Company X stocks for Rs.10,000/- and sell them for Rs. 11,000/- (10% profit). Both buy and sell transactions would cost you Rs. 20/- in commissions. So, your cost is Rs. 40/- (not including the cost of holding the securities) and your profit is Rs. 1,000. Essentially, you have made a good profit of Rs. 960/- on the whole transaction.
In percentage terms, you would have made 9.6% (960/10000) profit. It is very close to 10%.
Conclusion
What is a good investment – Rs. 1,000/- or 10,000/- or something in-between?
10% is a good return. In a real scenario, you may not get it but it gives us a good base for making decisions.
I would say that you should start with a minimum investment of Rs. 10,000/- per transaction. A real profit will give you some satisfaction or a real loss would force you to learn something new. Anything below Rs. 10,000/- may not be worthwhile.
Give it 1 year.
Over To You
What do you think is the lowest good amount? Has your thought process changed after reading this post? Please leave a comment.
Have a profitable life ahead!
